This article is from WeChat official account:Jazzyear (ID: jazzyear) , author: Gong Yue, Li Zhiying, editor: Yang Yang, the original title: “digital wave, how investors look to B | Jiazi light-years?”
In the past year, due to the catalysis of the epidemic, the gradual rise of industrial digitalization, and the acceleration of the digital transformation of global enterprises, the enterprise service (to B) market has once again become an important “outlet”. Looking at China, industries and fields related to the epidemic have received huge investment.
China’s to B market is full of water and fish. With the help of technologies such as AI, cloud computing, and big data, corporate services continue to be integrated into different scenarios and become the fast lane of digital and intelligent transformation in the post-epidemic era. With the effective implementation of strategies such as a technology-powered country and a network-powered country, China’s scientific and technological strength has gradually increased, and the next-generation IT architecture has gradually matured. To B still has ample room for development in China.
In fact, in the context of capital overweight and technological empowerment, more application layer opportunities and underlying infrastructure construction opportunities have emerged in the enterprise service field that emphasizes technology and services.
The other side of the coin is that, compared with overseas, China’s corporate service market started late and its standardization capabilities are also insufficient. At this time, how should we view the opportunities and challenges in the to B market? Where can new entrepreneurs find breakthroughs and even lead the industry?
This time, “Jiazi Light Year” invited Liang Junzhang, the founding partner of Kunzhong Capital, Qin Jie, the founding managing partner of Cloud Angel Fund, Wen Mianmian, partner of Jinshajiang Ventures, Xiao Wenbin, founder of Chenhui Ventures, and Jingya Capital Founding managing partner Zheng Jingwei and Lenovo Star partner Gao Tianyao discussed the above issues.
1. Under the epidemic, is it speeding up or stalling?
Jiazi Lightyear: What impact does the epidemic have on the to B field?
Zheng Jingwei: When we invested in the electronic signature company Yisignbao in 2017, most investors thought it was too early, but after the outbreak began, electronic signatures were mentioned very high in many provinces and cities. For example, Zhejiang Province has introduced the “maximum run once” policy. The Development and Reform Commission has joined dozens of ministries and commissions to turn smart contracts and electronic signatures into an important direction. Last year, the Ministry of Human Resources and Social Security and the Ministry of Housing and Urban-Rural Development issued a document encouraging everyone to use electronic signatures, Ali And Tencent has also made a big layout on this track.
This is an example of the impact of the epidemic on the track. In addition, the video conferencing system is also catalyzed by the epidemic. I believe there will be many similar cases.
Liang Junzhang: Corporate services have been continuously moving forward in the past few years, and the epidemic has played an objective role in promoting. Fields directly related to the epidemic, such as general health, medical management, and some areas related to smart cities, have received relatively large investment before and after the epidemic.
The company’s to B service itself takes time, unlike to C that will have explosive growth. After the development of the previous few years, the demand of the entire industry has continued to increase. For example, the automated production of the manufacturing industry has seen a relatively obvious increase in demand.
In the high-traffic offline scenes taking retail as an example, we have also seen obvious digital needs. Customers need to digitally upgrade the original offline scenes and environments, and digitally transform people, goods, and markets. Although this type of enterprise has clear digital needs, it takes time to develop and improve the internal enterprise service department. It must be too late to imagine in a vacuum. It needs the cooperation of external suppliers. In this process, the enterprise service entrepreneurship The company has a great opportunity.
Qin Jie: In the enterprise service market, from 2013 to 2015, we invested in some SaaS and network security companies. However, in 2017 and 2018, the market was actually questionable. This was related to the stage of enterprise service development, mainly because the penetration rate of enterprise services was insufficient and the scale of client companies was limited.
In the past two years, it can be clearly felt that the enterprise service sector, especially cloud-based software, SaaS and network security, has become popular in the market, and valuations are also rising. Most of these companies started their businesses in 2013 and 2014, and have gradually formed a scale now. Many late-stage investors have a greater sense of identity in the field of cyber security and SaaS.Come higher. This is a more obvious change we feel.
Wen Mianmian: Two very obvious trends can be observed after the epidemic. I summarize them as one is online and the other is automation.
About online, you can recall that when the epidemic first started last year, there were many industries that were not online before, such as offline retail brands and factories. During the epidemic, they began to transform online. Online procurement. Traditional industries that did not do well online, such as finance, banking, insurance, etc., have also begun to do SCRM (social customer relationship management) ) and online sales training, sales management and other online layouts.
Our work habits have also changed. For example, we used to make coffee appointments offline, but now our first meeting is basically a video conference. The resulting online marketing, sales management, as well as contracts and signing Chapters, collaboration, etc., are all new work habits brought about by the epidemic.
The second automation not only includes software automation, such as RPA(Robot Process Automation) and process automation. In the field of hardware, from 2019 to 2020, AGV(equipped with automatic guidance devices such as electromagnetic or optical) companies in industrial automation scenarios The revenue growth of the company has tripled every year. Beginning in 2020, many industrial scenarios have gradually generated large-scale demand for robotic arms.
There are also many opportunities in software and overseas related fields. Sellers and various overseas SaaS companies also have very good valuations and cash flow growth last year.
Jiazi Lightyear: For the to B market, is the epidemic brought good news?
Xiao Wenbin: Generally speaking, the digital transformation of large and medium-sized customers is accelerating.
The founders of our invested companies also reported a phenomenon. Their customers are mainly financial institutions and high-end manufacturing. Generally speaking, such large customers are slower. The epidemic has accelerated the speed of decision-making, which has made it easier for products related to security and digital solutions to be established and settled more quickly; at the same time, the cost of lobbying by customers has also been reduced a lot, which is a good thing.
On the other hand, the enterprise service market (especially the market serving medium and large customers) has a certain inertia and does not develop as fast as the consumer sector. Reflected in the inconsistent growth rate of performance and valuation. Last year, several companies’ valuations have increased four or five times, but their revenues can only grow by 50% to 100%. This also shows that the investment in the to B field is relatively hot at this stage. If you want to go further in the future, the business growth rate is still To keep up.
Zheng Jingwei: There are many large to B listed companies in the United States. For example, Crowdstrike has a market value of nearly 60 billion U.S. dollars, and Zscaler has a market value of nearly 30 billion U.S. dollars. From these companies, we can probably see what opportunities China has in the future, as well as the opportunities and challenges faced by VCs now.
The unmatched situation at this stage is that the business has not grown or increased by 50%, but the valuation has increased by 5 times. We feel that from 2017 to 2019, many companies can invest exclusively. However, from the second half of last year to this year, slightly better companies have been vying for it, and the result of the competition has caused the valuation of many companies to be unsupported.
The same situation has occurred even in the secondary market. For example, Snowflake went public 6 months ago and its stock price has risen steadily, but today the market value has returned to the level it was when it was listed. Now the Nasdaq is 13,000 points. Assuming that Nasdaq returns to 10,000 or 9,000 points, you can imagine what the stock prices of these technology companies will be like?
In the Internet bubble of 2000, I was in Silicon Valley; in the financial crisis of 2008, I was starting a business (the first round was invested by Jinshajiang). Having witnessed these two crises, we are actually more careful in investing now. Whether it is the epidemic or the hot market, our rhythm and standards have not changed much. This is what we have always insisted on.
Second, what are the new opportunities in the digital wave?
Jiazi Lightyear: Where are the new opportunities for corporate services in the digital wave? Are there any changes to the underlying technology?
Wen Mianmian: The underlying logic changes brought about by digitization are first reflected in the data and scenarios that were not originally available in the process of digitization. As a result, many opportunities have been born to bring the original offline The work shifted to digitization and online. For example, some of our portfolios are doing online interviews, corporate online training, and data collection for sales scenarios. We are also focusing on online procurement and cloud procurement.
The second overall trend is that data richness has been greatly improved. For example, what I have seen before is more based on text data to do NLP(natural language processing) analysis or image data to do CV(computer vision) analysis, and now whether it is on the to B side or on the to C side, a lot of video content is generated, such as the analysis of CV video data in the security field At the same time, with the changes in C-end consumption habits brought about by Douyin Kuaishou, the amount of video data in to B services has also greatly increased, which has increased the richness of data analysis.
Based on these two changes, we are very concerned about the application layer opportunities brought by the increasingly rich data bottom layer. Typically, different types of databases are based on processing different data relationships and different storage and computing requirements. Very big new opportunities in the construction of the underlying infrastructure.
Xiao Wenbin: In the past few years, I think the most certain trend at the technical level is cloudification, that is, cloud infrastructure accounts for an increasing proportion. Many software companies had their own IT computer rooms and small data centers a few years ago, but now this phenomenon has basically disappeared. This is a very obvious trend. As the penetration rate of cloud computing continues to increase, IT infrastructure changes such as cloud-native applications, the market for cloud infrastructure IaaS is much larger than SaaS, which may generate great entrepreneurial opportunities.
The second trend is at the business level. The biggest change in recent years is that all want to deposit data like the C-end>Serve the main business through data analysis. Of course, there are various kinds of data, such as text, pictures, and video data. The storage, analysis, and security surrounding the data will also generate many opportunities.
Liang Junzhang: From the bottom, IT infrastructure cloudification is a clear trend, and clear trends can be seen in various related fields such as computing, network, storage, and security. In terms of application, the process of precipitation and digitization involving various dimensions of data has created opportunities to make in-depth solutions around specific industries, allowing customers to perceive value and making general-purpose solutions more practical than in the past.
Gao Tianyao: At present, it seems that changes come from several aspects. One is based on changes in cost and prices, and there will be automation requirements;
Second, based on the changes of the underlying IT architecture cloud native, there will be opportunities such as security and other services;
Thirdly, based on the opportunities brought about by changes in business scenarios. For example, data usage compliance, we are also making some investments in privacy computing.
Jiazi Lightyear: What is the underlying logic of the network security and cloud-native boom?
Qin Jie: New types of network security companies are more popular now. One reason is that cloud computing is technically accepted by most companies. China’s cloud penetration rate is growing rapidly. In the new cloud environment, traditional network security solutions may fail.
The second aspect is the policy level. Five or six years ago, cyber security and data governance were not very important in China. Most of the customers were state-owned enterprises, banks and governments. In this case, the need for cyber security and policies is very large. Requirements related. In recent years, China has promulgated many policies on data governance, data security, data privacy, and network security, as well as many specific measures, so that these major customers will come up with budgets to support and invest in network security.
Network security itself has developed to a certain stage in technology, and with the help of external policies, the revenue of network security companies has grown rapidly in recent years, and the financial situation is relatively optimistic. Investors are also very optimistic about the field of network security. In the past, cyber security companies did KA
Three, vertical VS is common, which one is the shortcut?
Jiazi Lightyear: Under the current situation, what kind of company is more likely to lead the corporate service track? General SaaS or vertical SaaS?
Zheng Jingwei: We only invest in enterprise software and have a strong belief in enterprise services. To us, this track is “gold everywhere”.
Any track may have a chance to run out, after all, China is big enough. Whether it is horizontal applications, vertical applications, B to B industrial Internet, or infrastructure-related fields, including storage, security, developer tools, operation and maintenance tools, etc., I think there are opportunities.
I don’t think which track is easier or which track is harder. The track is not a problem. The most important thing is whether the product technology can be done well, so that customers can obtain huge value through the use of products, thereby improving customer retention , So that customers have a higher lifetime value. At the same time, the ability to face the market must be strong, whether it is marketing or sales ability, and enrich the product matrix. As long as the above points can be achieved, I think it is possible to run out.
Wen Mianmian: Since 2014, corporate services in the Chinese market have experienced several rounds of investment waves, and many people have completed the layout of the entire to B industry.
But in the current entrepreneurial environment of enterprise services, I personally think that the application of enterprise services in vertical industries has relatively more opportunities. The main point is that such companies are easier to find customers, and it is easier to find PMF(Product market match).
For companies with general-purpose enterprise services, in the previous rounds of investment waves, there have been some better companies that have a certain position and customer base in the market, and now they enter the market to provide general-purpose services such as HR and reimbursement are too late, and it is not easy to find a different entry point.
But on the vertical track, selecting specific industries, such as clothing, retail, industry, etc., and then providing standardized services based on customer needs, one is easier to have PMF, and the other is to establish a firm foothold in an industry , Whether it is to expand the entire industry supply chain or relocate to multiple different industries, it is a wiser and more effective method for companies entering the market now.
Qin Jie: Whether vertical or general-purpose enterprises, it is possible to run out, but now that there are relatively good general-purpose SaaS companies, it is not particularly easy for new entrepreneurs to enter the market again .
Vertical and general SaaS in different fields have different requirements for team capabilities. Generally, vertical fields require an understanding of the industry itself. Vertical scenarios are more specific and customer perception is relatively high.
The general-purpose type is more of a management type, or is related to the underlying technology of IT or cloud native. It is a management or technology platform, and user perception is not very obvious. However, with the improvement of users’ IT level or requirements for management requirements, if our Chinese software companies can provide products that meet high requirements, or can provide products comparable to those of the United States, they will also come out in the future. However, it will take longer for general basic software companies.
In the past two years, there have actually been some opportunities in this field. For example, the domestic substitution of key management platforms has given domestic horizontal basic management software some opportunities. The sales of our investment have encountered some in 2017 and 2018. Difficulties. The situation has improved in the past two years. This may have something to do with domestic substitution. Now the capabilities of domestic software are much stronger than in the past.
If you can really provide value to customers, let them feel the value, stick to it and do valuable things, and gradually expand your product influence, you will actually be able to come out in the end. But From the perspective of PMF, the development path of the vertical field is clearer and the development speed is faster.
Liang Junzhang: Whether general-purpose applications run faster or vertical applications run faster, it depends on two aspects in the end: one is the enterpriseService should measure its own value from the value that customers can feel. So first, customers are willing to accept your products; second, there are products that are good enough to meet customer needs. This is actually a match between supply and demand.
In the wave of corporate services from 2014 to 2015, many companies were directly benchmarking the United States, but under the circumstances at that time, the maturity of Chinese companies was very different from that of the United States; in addition, Chinese companies Enterprise software is also far less powerful than the United States. For example, the United States has powerful enterprise software companies such as Oracle and Microsoft, but China does not. This has caused a relatively large shortage of talents and industries.
So after that wave, the development of enterprise service companies in vertical industries may be relatively smoother. Later, with the increase in supply and demand, some companies have also expanded through horizontal or exogenous development. Your own industry, based on the experience in one industry, has been successful in many industries, and the more low-level general-purpose basic software just mentioned may also usher in a new wave of development opportunities.
4. Enterprise service entrepreneurs: Be calm enough
Jiazi Guangnian: New entrepreneurs who want to establish a foothold in the to B field, what should they do?
Xiao Wenbin: As an enterprise software company, the first is definitely to help customers solve problems, and the second is to strike a balance between productization and customization. The higher the degree of productization, Scale may be easier.
This is difficult to balance in China, but a good balance must be achieved to make the company bigger and bigger.
Gao Tianyao: First of all, we must have a long-term mentality. The time period for a certain amount of business in the field of enterprise services will be very long.
In addition, we need to see that the pricing difference in the corporate service market between China and the United States is still relatively large. Recently, QingyunWhen it is listed, it may be up to 10 times the PS(share price calculation rule) in China, but in the United States, this type of company may reach 40-50 times the PS.
For entrepreneurs, from their own perspective, what kind of structure and route they choose while doing a good job are all important in a long-term mentality.
Wen Mianmian: There is a relatively large bubble in the market now, and valuations and revenues are not in a reasonable ratio. Under this circumstance, entrepreneurs are expected to be down to earth.
Enterprise service is ultimately to serve customers. As long as you serve customers well, increase revenue, valuations, etc. will follow.
Zheng Jingwei: Entrepreneurs of corporate services must calm down and really polish their products and serve customers well.
Nowadays, many companies serve entrepreneurs, because there is a lot of capital in pursuit, and they have won the favor of many well-known funds at once, and they have taken high valuations. Many entrepreneurs are lighthearted. My suggestion: Don’t take the success of fundraising and the increase in valuation as a success. Whether there is income, whether it can be profitable, and whether the product helps customers create value, these are more important.
In the long run, after going public, corporate service companies will eventually have to withstand the test in the secondary market.
Qin Jie: The most important thing for a business service startup is to see whether the product really brings value to customers and makes them successful, and it must be adhered to as a long-term concept. In addition, in the development process, it is necessary to proceed step by step, and it is best to match the capital.
Chinese enterprise service companies have two legs: product and sales. The organization and management of the sales department, team building, and talent expansion are very particular at different stages, and entrepreneurs need to pay more attention.
Liang Junzhang: Enterprise service itself is a long-distance race, so first, you must have a calm mind and don’t be chaotically driven by capital. From the internal strength, products, sales, organization, talents and other aspects, you need to be an all-round player.
This article is from WeChat official account:Jiazi Lightyear (ID: jazzyear) , Author: Gong Yue, Li Zhiying